Division of Securities - Franchise and Business Opportunities

Franchise and Business Opportunities

All franchises must notice file or be exempt from filing prior to making any offers or sales in South Dakota.

Franchise Law SDCL 37-5B

Franchise Exemptions from Notice Filing 37-5B-12 , 37-5B-13 and 37-5B-14

South Dakota Notice Filing Process

In order to notice file a franchise in South Dakota, franchisors must submit ONE clean copy of the franchise disclosure document (“FDD”) pursuant to 16 C.F.R. Part 436. The Division would prefer the FDD to be filed on a CD. The Divisions electronic systems will accept the Microsoft Word (2002) format or PDF or image files such as .jpeg and .TIF formats. There are no other state disclosure requirements. In addition to the FDD, the following must also be submitted:

1) A notice filing application, (a franchisor may use the South Dakota franchisor application or the NASSA uniform franchise registration application);

2) A uniform consent to service of process; and

3) A fee of two hundred fifty dollars.

4) Going concern: Please note that pursuant to §37-5B-5, if the auditor concludes that there is substantial doubt about the franchisor’s ability to continue as a going concern for a reasonable period of time, the director shall be notified by separate letter as to the going concern issue with the notice filing application. There is also a continuing obligation to notify the director after a notice filing becomes effective within fifteen (15) days after the auditor concludes there is a going concern.

5) Notice filing of a franchise is effective upon receipt by the director.

6) Notice filing expires one year following the date of receipt of the initial application by the director. The notice filing requirements for the annual renewal are the same as set forth above except the renewal fee is one hundred and fifty dollars.

7) Updating disclosure documents. There is no filing required with the division for updating disclosure documents; but disclosure information shall be updated as follows:

Any information in the disclosure document shall be current as of the close of the franchisor's most recent fiscal year. After the close of the fiscal year, the franchisor shall, within one hundred twenty days, prepare a revised disclosure document, after which a franchise seller may distribute only the revised document and no other disclosure document;

The franchisor shall, within a reasonable time after the close of each quarter of the fiscal year, prepare revisions to be attached to the disclosure document to reflect any material change to the disclosures included, or required to be included, in the disclosure document. Each prospective franchisee shall receive the disclosure document and the quarterly revisions for the most recent period available at the time of disclosure;

If applicable, the annual update shall include the franchisor's first quarterly update, either by incorporating the quarterly update information into the disclosure document itself, or through an addendum;

When furnishing a disclosure document, the franchise seller shall notify the prospective franchisee of any material changes that the seller knows or should have known occurred in the information contained in any financial performance presentation; and

Information that must be audited pursuant to the disclosure requirements need not be audited for quarterly revisions if the franchisor states in immediate conjunction with the information that the information was not audited.

Interpretive Opinions

The director may upon request and the payment of a fee of fifty dollars, honor requests for interpretive opinions. §37-5B-30.

Business Opportunity Law SDCL 37-25A

Business Opportunity Registration

To register a business opportunity, the seller must file with the director the following:

A disclosure document prepared pursuant to §37-25A-15;

A fee of $100 pursuant to §37-25A-10; and

A consent to service of process pursuant to §37-25A-9. Download form BU-2.

Business Opportunity Renewal

A registration is effective one year from the date of effectiveness and may be renewed annually. A current disclosure document pursuant to §37-25A-15 must be submitted with a fee of $50 pursuant to §37-25A-12. Failure to renew upon the close of the one-year period shall result in the expiration of the registration.

If you have questions, please contact Melita Hauge at 605-773-4823 or e-mail drr.securities@state.sd.us.

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South Dakota Department of Revenue & Regulation

445 East Capitol Avenue

Pierre, SD 57501-3185

Phone: (605)-773-3311

Fax: (605)-773-6729

E-Mail Address: webman@state.sd.us